Greek leftwing opposition leader Alexis Tsipras comments on European finance ministers failure to approve a new loan installment for Greece, 21 November 2012.

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5.12pm GMT

And with that, we're going to close the blog for the day. Thanks, as ever, for all your comments.

5.12pm GMT

Speaking of Spain, the New York Times is running a hard-hitting piece about how Spaniards are scrimping in the time of crisis. Dan Bilefsky writes:

María Cristina Riveros can barely afford to live, let alone die. So when the end comes, she insists, there will be no spray of red roses or marble tombstone to mark her grave. Instead she is donating her body to science, to avoid being a financial burden on her family.

I’m not upset about death — I’m upset about life,” said Mrs. Riveros, 53, an unemployed geriatric nurse and single mother, as she waited in line on a recent day for food at a church here.

5.12pm GMT

In steps Spanish prime minister Mariano Rajoy, who is sounding very relaxed about the budget discussions.

I would like us to reach an agreement, but there is no drama if there's no agreement tonight.

He is expecting a "reasonable" budget.

Our main concerns are agriculture, the regions, ultra-peripheral regions, such as Ceuta, Melilla. If the EU budget goes down, then Spain will have to contribute less. But it is premature to talk about numbers now.

He does, however, expect negotiations to be "difficult".

I'm going to be very active, as usual. I'm attending this [summit] with a constructive spirit.

No pictures of him emerging from a car just yet.

5.12pm GMT

Quick look at the markets, which rose for a fourth day running, after strong Chinese data boosted mining stocks.

Even with the potential for news of a compromise solution for the budget participation of the UK within the eurozone, markets will quickly begin to price in the uncertainty over the US fiscal cliff. So any euphoria with good news can be expected to be short lived. Dark clouds lie ahead, with 2013 approaching and more questions than answers right now. Will the UK continue to be perceived as a relative safe haven within the eurozone? Until this question can be answered with some conviction, the FTSE 100 markets can be expected to remain range bound.

5.12pm GMT

Next up, Polish PM Donald Tusk. Tusk says the UK is "very likely" to block a budget compromise at the EU summit.

Merkel says there is a chance of a second summit to discuss the EU budget, after a decision on Greece was postponed for a second meeting.

It is important that we arrive at a solution. Whether that can happen now in these two days, Thursday and Friday, I don't know. Germany wants to reach the goal but it may be that we need a further stage.

'Greece has done what it had to and what it had committed to doing,' the country's prime minister, Antonis Samaris, said after learning of the deadlock after marathon talks in Brussels. Photograph: Philippe Huguen/AFP/Getty Images

5.12pm GMT

Merkel pessimistic on EU budget deal

And now for the politicians laying the ground for another failed summit. German Chancellor Angela Merkel has said an EU budget deal may not be possible this week.

She, at least, is saying she is prepared to compromise to reach a deal. Judging by the posturing from everyone else she may have to compromise quite substantially to reach any kind of agreement.

5.12pm GMT

There's talk that British PM David Cameron will veer even further away from Europe and call an in/out referendum in 2014.

A recent opinion poll showed that 56% percent of Britons would either definitely, or most likely, vote to leave the EU in a referendum. Only 30% said they wanted the UK to remain a member. The desire to leave cut across all the three main political parties.

5.12pm GMT

Eurozone morale hits three-and-a-half year low

There are some miserable consumer confidence figures out of the eurozone, where morale has apparently hit a three-and-a-half year low.

European Commission figures show confidence dropped again in November to a 42-month low. Confidence had previously edged up in October after falling continuously over the four-month period between June and September.

Howard Archer of IHS Global Insight said:

The renewed drop in confidence reinforces suspicion that Eurozone consumers will be extremely careful in their spending in the fourth quarter, thereby contributing to a likely further fall in GDP. Indeed, with consumer confidence sinking to a 42-month low in November and the purchasing managers’ surveys pointing to ongoing appreciable overall contraction in services and manufacturing activity and new orders, the Eurozone seems headed for deeper GDP contraction in the fourth quarter than the 0.1% quarter-on-quarter drop that occurred in the third quarter.

EU budget veto team

Back to the eurozone summit, where Cameron is not, in fact alone in his bid to veto the budget. Think tank Open Europe has developed an entire football squad of naysayers, with Cameron as centre forward in prime position to strike. They write:

CF:David Cameron leads the line, ready to strike and seen as the most likely to pull the trigger on any veto.

RW: Swedish Prime Minister Fredrik Reinfeldt at right winger hugging the line (sticking to his guns), happy to put in a shift for the team and more likely to offer an assist/support for Cameron than to deliver the final blow himself.

AM: French President François Hollande is the mercurial trickster playing between the lines but not quite sure of his role or his aims. Ultimately a selfish player (as are many of the others) but who’s own personal gain could ultimately be detrimental to the rest of the team.

DM: Italian Prime Minister Mario Monti is playing the stoic holding role, refusing to budge and occasionally gesticulating wildly at the referee, although never actually getting into the danger zone at the forefront of the action. More likely to break up play and provide a stumbling block than deliver a knockout blow to the opposition. Unlike the rest of the team, not here on merit (elected) but parachuted in by the powers above.

Substitution

Schäuble: no haircut for Greece

The German finance minister, Wolfgang Schäuble, is at it again, by which we mean declaring his opposition to a writedown of public holdings of Greek debt. He said today:

The moment we decide to give Greece a haircut, we cannot give Greece any new guarantees - that is logical because the budget law rightly says you can only take on guarantees if you believe that the debt will be paid back so you can't do both.

He said as much last week, and at the end of October, so top marks for consistency - both to Schäuble and the hacks who keep asking him the same question.

So while we all wait for a load of politicians to sort out the Euro budget over a nice supper (plus midnight feast and breakfast) it is perhaps not the worst time to run through exactly what this is all about.

The Press Association's political editor Andrew Woodcock has written a nice QnA on all this:

Q: What's the summit all about?A: This special summit of the 27 leaders of EU member states has been called to set the ceiling for European Union spending over the seven-year period 2014-20 - known in euro-speak as the Multiyear Financial Framework or MFF.As well as a global figure for spending, the leaders also aim to agree a framework for contributions by member states to fund the EU's activities and around 70 spending programmes for different policy areas - such as growth, agriculture or security - which will shape the EU's priorities up to the end of the decade.

Q: So can we expect to know by the end of it exactly the size of the EU's budget for the rest of the decade? A: It's not as simple as that. The Council is supposed to set a "commitment ceiling", which represents the maximum which the EU can promise to spend over the seven years, as well as a "payments ceiling", which is the maximum it can actually spend over that period and is generally rather lower. But the actual budget is set annually, in a separate set of negotiations. Historically, the budget has always been well below either of the ceiling figures. But we won't know its size until 2020 - and maybe not even then. Negotiations are still going on in Brussels not only about the budget for 2013, but also the budget for 2012.

Q: With Europe in financial trouble, presumably everyone agrees the EU will have to tighten its belt? A: Not at all. More than half of the EU's members - including several of those in the worst financial difficulties, such as Greece - receive more from Brussels than they contribute. Understandably, many of them want to see EU spending rise, particularly on support for disadvantaged regions. The European Commission and European Parliament, too, have both called for an increase in the overall budget.

Q: What does Prime Minister David Cameron want? A: Mr Cameron has said he will insist at least on a real-terms freeze in the EU budget, and preferably a cut. He has also said he will protect Britain's rebate. But he is under massive pressure from his own backbenchers, after Tory rebels joined Labour to pass a parliamentary motion demanding a reduction in the budget.

Q: What are the proposals on the table at this summit? A: European Council president Herman van Rompuy has put forward a set of proposals which it is thought would result in a commitment ceiling of around €973bn and a payments ceiling of around €940bn, at 2011 prices. After inflation has been taken into account, this would amount to a small reduction on the ceilings set for the previous period 2007-13.

Q: What does the European Commission want? A: Its latest proposal would see the commitments ceiling soar to €1,033bn and the payments ceiling to €988bn, again in 2011 prices.

Q: So is Mr Cameron happy with the Van Rompuy proposals? A: Not entirely. Britain regards the President's plan as a step in the right direction, but is wary about what spending levels would actually result. The van Rompuy proposals also involve a reform of the "Own Resources" system, including Britain's rebate, which will provoke stiff resistance from London.

Q: What about the rebate? A: Britain believes its rebate, negotiated by Margaret Thatcher in the 1980s and currently worth about €3.6bn a year, remains fully justified. Essentially, the rebate compensates Britain for the fact that, although it is one of Europe's biggest economies, it receives relatively little in support for its farmers through the Common Agricultural Policy (CAP). Without it, the UK's net contribution to Brussels in 2010 would have been €10.9bn - almost as much as Germany. Even with the the rebate, Britain's net contribution is considerably higher than those of France or Italy.

Q: Will the CAP be reformed? A: Mr van Rompuy's plans envisage a small reduction in CAP spending, but this is fiercely resisted by France. Ironically, if the CAP is cut, Britain might end up having to contribute more, because the level of the rebate is fixed according to a complicated mathematical formula including the level of EU spending on agriculture.

Q: So how will we know if Mr Cameron has got what he wants? A: It will be difficult to be sure. With so many different measures of EU spending, a freeze or cut in one of the ceilings being set this week may not translate into a freeze or cut in the actual amount of money spent. No figures for the level of the rebate or Britain's net contribution are expected to emerge until some time after the summit, once the number crunchers have had the chance to analyse its outcome.

Q: Is the Prime Minister likely to walk out? A: Sources close to Mr Cameron insist he is keen to get a deal this week, though he recognises it will be difficult. It looks likely he will only wield the UK's veto if he feels it is absolutely necessary to avoid an agreement which is not in the national interest.

Q: How long will it all last? A: Nobody knows. Mr van Rompuy will hold one-on-one talks with all 27 leaders, including Mr Cameron, before the summit opens. After an initial working session, he will produce a new "negotiation box" late today, taking into account the competing priorities of different countries. That will fire the starting gun on a new round of wrangling, with different national teams working through the night to determine whether the new proposals are favourable to them. Few in Brussels believe the arguments will be done and dusted by the official conclusion of the summit tomorrow evening. Chances are there will be talks through the night tomorrow, with a final conclusion - or the collapse of the talks - not arriving until Saturday or even Sunday.

5.12pm GMT

Rehn: 'no reason' why Greek debt deal can't be done

Another quick note of optimism on Greece (there are reason to be cheerful, if you look hard enough). The country has taken all the steps necessary to secure its next tranche of aid, and eurozone finance ministers should be able to sign off definitively on the assistance on Monday, the European commissioner for economic affairs has said.

Olli Rehn told the European parliament:

I trust everyone will reconvene in Brussels on Monday with the necessary constructive spirit, and move beyond the detrimental mindset of red lines.

Frankly, I see no reason why we should not be able to conclude the package - and do away with the uncertainty that has been holding back a return of confidence, and thus of investment and growth, in Greece.

Still, cynics might say they can identify at least one reason it all might fail: namely form. Finance ministers have met twice in the past two weeks but failed both times to agree on the next steps for Greece and how to bring its debt level down to a sustainable level, despite more than 24 hours of negotiation.

Tucker: no 'full separation' of retail and investment banking

Back at the Commission on Banking Standards, Paul Tucker, the frontrunner to become the next governor of the Bank of England, told MPs he does not want to see the full separation of retail and investment banks, warning that even if it were forced by law, the economy would still be at risk of being “blown up” by non-retail banks and other financial institutions. He said: “The thing that has worried me most about this debate from the beginning... is that people fall into thinking, ‘if only we could make retail banking safe, the financial system will be safe’, and frankly I think that is nonsense. I think the financial system and the economy will be capable of being blown up by vast wholesale dealers and non-banks.”

The full story will be online shortly.

Paul Tucker, frontrunner to be the next governor of the Bank of England, says the economy remains at risk of being 'blown up' by non-retail banks. Photograph: Micha Theiner/City AM/Rex Features

Easy auction for Spain

Spain sold nearly €4bn of bonds with ease at an auction this morning as it kicked off what will be a rather daunting funding programme for 2013.

The Treasury beat the top end of the target of €2.5-3.5bn at borrowing costs that were slightly down from previous auctions - although they are still high.

The average yield on the 2021 bond was 5.517%, compared with around 5.6% for the benchmark 10-year on the secondary market, a long way from over 7% levels in July.

Nicholas Spiro, managing director of Spiro Sovereign Strategy, has three points to make on it all:

1. The surreal air of calm surrounding Spain's bond market shows no signs of dissipating. Quite the opposite. The Treasury has met its financing needs for this year and is already pre-funding its 2013 requirements. The fairly modest size of today's auction, and the enduring signalling effect of the ECB's bond-buying programme, made for a relatively successful sale - and one of longer-term paper at that. Demand held up and yields for the 3 and 5-year notes were just a tad below secondary market levels. For the time being, Spain is accessing the market with relative ease.

2. Right now, the million dollar question is: how long will the ECB's signalling effect alone suffice to suppress Spanish yields? It's tempting to take the view that the market is becoming less sensitive to a Spanish request for an ECB-backed bond-buying programme. Madrid would like to think this is the case but it's very unlikely, given the scale and severity of Spain's financial and economic plight, that investors no longer believe Spain requires external aid. The reality is that the current standoff over a sovereign bailout for Spain suits all three sides - Madrid, investors and the ECB - to varying degrees.

3. This is the longest period of relative calm enjoyed by Spanish and Italian debt markets since the eurozone crisis escalated dramatically in November 2011. Indeed, the yield on 10-year Spanish paper now stands at the top end of the band in which it was trading early last year when Spain was said to have "decoupled" from its more distressed eurozone peers. But while the ECB is holding the fort, eurozone leaders keep dragging their feet in putting in place the political, regulatory and institutional measures needed to shore up the ill-managed single currency area.

5.12pm GMT

Cameron first

David Cameron is the first of the string of EU leaders to being ushered in to meet with the European Commission president, José Manuel Barroso, and the European Council president and summit chairman, Herman Van Rompuy this morning.

This is part of an unusual pre-summit effort to avoid deadlock when the actual thing gets under way tonight over dinner - although we'll see about that.

Cameron wants at least a real-terms freeze in EU spending, if not actual cuts, and to retain in full Britain's EU budget rebate worth nearly £3bn a year off the UK's annual contributions to Brussels.

A pre-summit compromise is already on offer - a seven-year budget "envelope" of €940bn for 2014/2020 - a cut of nearly €5bn compared with the 2007/2013 ceiling.

The move was seen in Downing Street as being in the right direction - although the "cut" is in a spending ceiling which officials say has not been reached.

It is also above the €886bn originally pitched by the Treasury as in line with the real-terms freeze Cameron wants.

The Prime Minister's allies for budget belt-tightening, including Sweden and the Netherlands, have both demanded hefty financial cuts. Germany, France, Finland and Austria want to freeze the maximum Brussels can draw from member states every year - leaving plenty of scope to argue over the actual spending figures within the ceiling.

And 15 countries, led by Poland, are backing budget increases - not least to preserve the scale of cash aid they receive as "net beneficiaries" from the EU kitty.

David Cameron talks to the press as he arrives for a two-day European Union leaders summit called to agree a hotly-contested €1tn budget through 2020. Photograph: Georges Gobet/AFP/Getty Images

5.12pm GMT

If you can bear to drag yourself away from all the action in the eurozone, the Banking Standards Commission hearing has kicked off.

My colleague Jo Moulds, who follows these things so that we don't have to, reports:

The Bank of England governor, Sir Mervyn King, is counting down the days to the end of his term. "Seven months, eight days", he told Andrew Tyrie. "Is it that bad? asked Tyrie.

King added that the ringfence should start with defining what are core banking services. So you stick the ringfence around them and not the other way round as it's hard to define what is prop trading etc.

Meanwhile - Paul Tucker has finally made a contribution after a very quiet start (who can blame him after his last performance in front of MPs over Libor?). He says that future EU law could allow the regulator to require banks to restructure so that they are “resolvable”.

Outgoing Bank of England governor Mervyn King. Photograph: Reuters

5.12pm GMT

Eurozone wrangle

The weak Eurozone PMI outturn for November is a major disappointment in light of the increases in the German and French PMI surveys, and suggest that that the recession on the Eurozone’s periphery is gathering further pace. The lack of change in the headline composite index (45.8 versus 45.7 in October) reflected diverging movements across the main components. In a clear sign that fiscal tightening continues to take a heavy toll on domestic demand, the services PMI fell from 46.0 to a 40-month low of 45.7. The manufacturing PMI, by contrast, improved, but at 46.2 it remains in deep contraction territory.

Looking at the available country data, the French composite output index rose for a second month from 43.5 to 44.6, while the German equivalent also edged higher from 47.7 to 47.9. A flash estimate for the other Eurozone countries is not available, but the average for this group sank further into contraction territory – which arguably is the most disturbing aspect of today’s report.

All in all, today’s PMI figures confirm that the eurozone economy remains firmly stuck in recession. Looking ahead, we still think that ECB’s recent actions and the improvement in the global economy (as signaled by the further pickup in the Chinese PMI) will provide some respite to the Eurozone economy. But with the fiscal squeeze across the region continuing, any return to positive growth next year will likely be slow and gradual – and largely confined to the ‘core’ countries.

5.12pm GMT

Eurozone as bad as 2009

Another half hour, another set of PMIs.

It seems that the eurozone economy is on course for its weakest quarter since early 2009, as business surveys showed companies battling shrinking order books in November. Reuters reports:

Service sector firms like banks and hotels that comprise the bulk of the economy fared particularly badly this month, and laid off staff at a faster pace.

While the monthly rate of decline that manufacturers reported eased far more than economists anticipated, Markit's latest Purchasing Managers' Indexes (PMIs) pointed to little change overall for a recession-hit euro zone this month.

The flash service sector PMI fell to 45.7 this month, its lowest reading since July 2009, the survey showed on Thursday, failing to meet the expectations of economists who thought it would hold at October's 46.0.

Still, there are more positive signs in other sectors:

A Spanish flag flutters in front of the headquarters of Bankia in Madrid. Banks have been struggling across the eurozone. Photograph: Sergio Perez/Reuters

The US court ruling, made late on Wednesday in New York, apparently raises the possibility of Argentina defaulting again, but more significantly it seems to undermine the concept of sovereign immunity against creditors that has "largely reigned in international law for almost a century".

By the way, if you'll forgive the rather strained link, for anyone wanting to read an accessible guide to the euro crisis, there are many worse than this - with thanks to Pedro Barrento.

5.12pm GMT

German services confidence at 44-month low

Mixed news from Germany. On one hand its November manufacturing PMI has come in at 46.8, compared to the consensus estimate of 46.0. But on the other, services PMI came in at 48.0, less than estimates of only 48.4. Markit Economics, which releases the figures, has some historical context:

5.12pm GMT

France: not as bad as thought

Some good news, of sorts. France has provided a less miserable start to the day than feared.

Its manufacturing PMI rose more than expected last month, the preliminary data shows, to a seasonally adjusted 44.7, from 43.7.

Obviously that still represents a contraction, but analysts had expected the measure to rise to only 44.1. Still, some depressing caveats remain.

FTSE hits one-week highs on Chinese PMIs

London markets have opened and we are up – at least partly on the back of a return to growth of in Chinese manufacturing, which boosted demand prospects for the produce of FTSE metals and energy companies.

Workers arrange steel pipes at a factory in Huaibei, Anhui province. China's manufacturing activity has risen in November for the first time in 13 months, official data shows. Photograph: AFP/Getty Images

5.12pm GMT

There are far worse ways of starting the morning than listening to Michael Hewson, the senior market analyst at CMC Markets. Here are a few of his early thoughts:

Putting aside and parking the perennial problem of Greece and the preoccupation about its debt to GDP ratio and debt sustainability for a few days, there remains the problem of a European economy mired in recession, with EU leaders too preoccupied with meetings and protracted budget negotiations to notice that growth is non-existent and unemployment continues to rise rapidly.

This is expected to be reinforced by preliminary November manufacturing and services PMI for France, Germany and the aggregated Eurozone numbers, which aren’t expected to show much of an improvement on figures a couple of weeks ago.

Needless to say while some small improvements are expected, the numbers still point to a Q4 in Europe firmly in contraction with Germany starting to feel the proverbial chill quite sharply.

Expectations are for France manufacturing and services PMI to improve slightly to 44.1 and 45.3 respectively, while Germany manufacturing and services is expected to remain unchanged at 46 and 48.4.

The Eurozone numbers for manufacturing and services are expected to improve slightly to 45.6 and 46.1.

5.12pm GMT

Today's events

Good morning, and welcome to our rolling coverage of the eurozone crisis. Oh, and happy Thanksgiving.

Obviously the US will be eating rather than working this afternoon, so much of the market action is going to be packed into the first part of our day.

There have been a few gains overnight (the euro has hit a six-and-a-half-month high against the yen) as traders seem to have bought the line from politicians that a deal on emergency aid for Greece is close (you may have heard that one before).

We are also awaiting a string of PMI numbers, get the Banking Standards Commission quizzing a trio from the Bank of England – governor Sir Mervyn King, (the governor in waiting?) Paul Tucker and Andy Haldane. And, of course, later today EU leaders meet to overcome deep divisions over the bloc's spending plans, worth almost €1tn. Obviously when we say "overcome" that is aspiration rather than expectation.